IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA Federal Trade Commission, v. Vemma Nutrition Company, et al. No. CV-15-01578-PHX-JJT STIPULATED ORDER FOR PERMANENT INJUNCTION AND MONETARY JUDGMENT AGAINST INDIVIDUAL DEFENDANT TOM ALKAZIN AND RELIEF DEFENDANT BETHANY ALKAZIN Plaintiff, the Federal Trade Commission (“Commission” or “FTC”), filed its Complaint for Permanent Injunction and Other Equitable Relief pursuant to Section 13(b) of the Federal Trade Commission Act (“FTC Act”), 15 U.S.C. § 53(b). The Commission and Individual Defendant Tom Alkazin and Relief Defendant Bethany Alkazin stipulate to the entry of this Stipulated Order for Permanent Injunction and Monetary Judgment against Individual Defendant Tom Alkazin and Relief Defendant Bethany Alkazin (“Order”) to resolve all matters in dispute in this action between them. THEREFORE, IT IS ORDERED as follows:
35
Embed
[Proposed] Stipulated Order for Permanent Injunction and ... · unlawful pyramid scheme, ... marketing, promoting, or offering a pyramid scheme, Ponzi scheme, ... Any material aspect
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA
Federal Trade Commission, v. Vemma Nutrition Company, et al.
No. CV-15-01578-PHX-JJT STIPULATED ORDER FOR PERMANENT INJUNCTION AND MONETARY JUDGMENT AGAINST INDIVIDUAL DEFENDANT TOM ALKAZIN AND RELIEF DEFENDANT BETHANY ALKAZIN
Plaintiff, the Federal Trade Commission (“Commission” or “FTC”), filed its
Complaint for Permanent Injunction and Other Equitable Relief pursuant to Section 13(b)
of the Federal Trade Commission Act (“FTC Act”), 15 U.S.C. § 53(b). The Commission
and Individual Defendant Tom Alkazin and Relief Defendant Bethany Alkazin stipulate
to the entry of this Stipulated Order for Permanent Injunction and Monetary Judgment
against Individual Defendant Tom Alkazin and Relief Defendant Bethany Alkazin
(“Order”) to resolve all matters in dispute in this action between them.
THEREFORE, IT IS ORDERED as follows:
2
FINDINGS
1. This Court has jurisdiction over this matter.
2. The Complaint charges that Individual Defendant Tom Alkazin participated
in deceptive acts or practices in violation of Section 5 of the FTC Act, by operating an
unlawful pyramid scheme, by making false and misleading income claims, by failing to
disclose material information, and by providing participants in Defendants’ scheme with
the means and instrumentalities to engage in deceptive acts and practices.
3. The Complaint charges that Relief Defendant Bethany Alkazin received,
directly or indirectly, funds or other assets from Corporate Defendants that are traceable
to funds obtained through the deceptive acts or practices described herein and that Relief
Defendant will be unjustly enriched if she is not required to disgorge the funds.
4. Individual Defendant and Relief Defendant neither admit nor deny any of
the allegations in the Complaint, except as specifically stated in this Order. Only for
purposes of this action, Individual Defendant and Relief Defendant admit the facts
necessary to establish jurisdiction.
5. Individual Defendant and Relief Defendant waive any claim that they may
have under the Equal Access to Justice Act, 28 U.S.C. § 2412, concerning the
prosecution of this action through the date of this Order, and agree to bear their own costs
and attorney fees.
6. Individual Defendant and Relief Defendant waive all rights to appeal or
otherwise challenge or contest the validity of this Order.
3
DEFINITIONS
For the purpose of this Order, the following definitions apply:
A. “Business Venture” means any written or oral business arrangement,
however denominated, whether or not covered by 16 C.F.R. Part 437, that consists of the
payment of any consideration for the right or means to offer, sell, or distribute goods or
services (whether or not identified by a trademark, service mark, trade name, advertising
or other commercial symbol). The definition of “Business Venture” includes Multi-level
Marketing Programs.
B. “Clear(ly) and conspicuous(ly)” means that a required disclosure is
difficult to miss (i.e., easily noticeable) and easily understandable by ordinary consumers,
including in all of the following ways:
1. In any communication that is solely visual or solely audible, the
disclosure must be made through the same means through which the
communication is presented. In any communication made through both visual and
audible means, such as a television advertisement, the disclosure must be
presented simultaneously in both the visual and audible portions of the
communication even if the representation requiring the disclosure is made in only
one means.
2. A visual disclosure, by its size, contrast, location, the length of time
it appears, and other characteristics, must stand out from any accompanying text or
other visual elements so that it is easily noticed, read, and understood.
3. An audible disclosure, including by telephone or streaming video,
4
must be delivered in a volume, speed, and cadence sufficient for ordinary
consumers to easily hear and understand it.
4. In any communication using an interactive electronic medium, such
as the Internet or software, the disclosure must be unavoidable.
5. On a product label, the disclosure must be presented on the principal
display panel.
6. The disclosure must use diction and syntax understandable to
ordinary consumers and must appear in each language in which the representation
that requires the disclosure appears.
7. The disclosure must comply with these requirements in each
medium through which it is received, including all electronic devices and face-to-
face communications.
8. The disclosure must not be contradicted or mitigated by, or
inconsistent with, anything else in the communication.
9. When the representation or sales practice targets a specific audience,
such as children, the elderly, or the terminally ill, “ordinary consumers” includes
reasonable members of that group.
C. “Covered Product” means any dietary supplement, food, or drug,
including, but not limited to, Vemma Health, Verve, and Bod•ē drinks, and any
nutritional product purporting to contain the “VEMMA” formula of vitamins, essential
minerals, mangosteen, and aloe.
5
D. “Defendants” means the Individual Defendant, the Corporate Defendants,
and Defendant Benson K. Boreyko, individually, collectively, or in any combination.
1. “Corporate Defendants” means Vemma Nutrition Company,
Vemma International Holdings, Inc., and their successors and assigns.
2. “Individual Defendant” means Tom Alkazin.
3. “Relief Defendant” means Bethany Alkazin.
E. “Dietary supplement” means:
1. Any product labeled as a dietary supplement or otherwise
represented as a dietary supplement; or
2. Any pill, tablet, capsule, powder, softgel, gelcap, liquid, or other
similar form containing one or more ingredients that is a vitamin, mineral, herb or
other botanical, amino acid, probiotic, or other dietary substance for use by
humans to supplement the diet by increasing the total dietary intake, or a
concentrate, metabolite, constituent, extract, or combination of any ingredient
described above, that is intended to be ingested, and is not represented to be used
as a conventional food or as a sole item of a meal or the diet.
F. “Essentially Equivalent Product” means a product that contains the
identical ingredients, except for inactive ingredients (e.g., binders, colors, fillers,
excipients), in the same form and dosage, and with the same route of administration (e.g.,
orally, sublingually), as the Covered Product; provided that the Covered Product may
contain additional ingredients if reliable scientific evidence generally accepted by experts
in the field indicates that the amount and combination of additional ingredients is
6
unlikely to impede or inhibit the effectiveness of the ingredients in the Essentially
Equivalent Product.
G. “Liquidating Receiver” means Robb Evans and Associates LLC.
H. “Multi-level Marketing Program” means any marketing program in
which participants pay money to the program promoter or purchase products in return for
which the participants obtain the right to: (1) recruit additional participants, or have
additional participants placed by the promoter or any other person into the program
participant’s downline, tree, cooperative, income center, or other similar program
grouping; (2) sell goods or services; and (3) receive payment or other compensation that
is based, in whole or in part, upon the payments or purchases made by those in the
participant’s downline, tree, cooperative, income center or similar program grouping.
I. “Reliably reported,” for a human clinical test or study (“test”), means a
report of the test has been published in a peer-reviewed journal, and such published
report provides sufficient information about the test for experts in the relevant field to
assess the reliability of the results.
ORDER
I. PROHIBITED MARKETING PROGRAMS
IT IS ORDERED that Individual Defendant is permanently restrained and
enjoined from advertising, marketing, promoting, or offering a pyramid scheme, Ponzi
scheme, or chain marketing scheme, whether directly or through an intermediary.
7
II. BAN ON CERTAIN BUSINESS PRACTICES
IT IS FURTHER ORDERED that Individual Defendant is permanently
restrained and enjoined from directly or indirectly controlling or owning, in whole or in
part, any business advertising, marketing, promoting, offering, or assisting in the
advertising, marketing, promoting, or offering of a Business Venture that:
A. Pays any compensation for recruiting new participants into the Business
Venture;
B. Links or ties a participant’s compensation, or eligibility to receive
compensation, to that participant’s purchase of goods or services; or
C. Pays a participant any compensation related to the sale of goods or services
in a fixed pay period unless the majority of the total revenue generated during such
period by the participant and others within the participant’s downline is derived from
sales to persons who are not participants in the Business Venture.
III. PROHIBITION AGAINST MISREPRESENTATIONS OR UNSUBSTANTIATED CLAIMS
IT IS FURTHER ORDERED that Individual Defendant and his officers, agents,
employees, and attorneys, and all other persons in active concert or participation with any
of them, who receive actual notice of this Order, whether acting directly or indirectly:
A. In connection with the advertising, marketing, promoting, or offering of
any Business Venture, are permanently restrained and enjoined from:
8
1. Misrepresenting or assisting others in misrepresenting, including by
providing others with the means and instrumentalities with which to misrepresent,
expressly or by implication:
a. That participants will or are likely to earn substantial income
from selling any good or service or by participating in the Business
Venture;
b. The amount of sales, income, or profit a participant earned by
selling any good or service or by participating in the Business Venture;
c. That participants who do not earn significant income fail to
devote substantial or sufficient effort; or
d. Any other fact material to participants concerning the
Business Venture, such as: the total costs to participate, including trainings,
brochures, and sales aids; any material restrictions, limitations, or
conditions on operating the Business Venture; or any material aspect of its
performance, efficacy, nature, or central characteristics;
2. Making any representation, expressly or by implication, regarding
the amount or level of income, including full-time or part-time income, that a
participant can reasonably expect to earn unless the representation is non-
misleading and, at the time such representation is made, Individual Defendant
possesses and relies upon competent and reliable evidence sufficient to
substantiate that the representation is true. Implied representations regarding the
amount or level of income that a participant reasonably can expect to earn include,
9
but are not limited to, representations involving and images used to show an
improved lifestyle;
B. In connection with the advertising, marketing, promoting, or offering of
any good or service, are permanently restrained and enjoined from misrepresenting or
assisting others in misrepresenting, including by providing others with the means and
instrumentalities with which to misrepresent, expressly or by implication:
1. The total costs to purchase, receive, or use, and the quantity of, the
goods or services;
2. Any material restriction, limitation, or condition to purchase,
receive, or use the goods or services;
3. Any material aspect of the performance, efficacy, nature, or central
characteristics of the goods or services;
4. Any material aspect of the nature or terms of the seller’s refund,
cancellation, exchange, or repurchase policies; or
5. Any other material fact;
C. In connection with the advertising, marketing, promoting, or offering of
any Covered Product, are permanently restrained and enjoined from making, or assisting
others in making, expressly or by implication, including through the use of a product or
program name, endorsement, depiction, or illustration, any representation that such
product cures, mitigates, or treats any disease; unless the representation is non-misleading
and, at the time of making such representation, Individual Defendant possesses and relies
upon competent and reliable scientific evidence to substantiate that the representation is
10
true. For purposes of this Section, competent and reliable scientific evidence shall
consist of human clinical testing of the Covered Product, or of an Essentially Equivalent
Product, that is sufficient in quality and quantity based on standards generally accepted
by experts in the relevant disease, condition, or function to which the representation
relates, when considered in light of the entire body of relevant and reliable scientific
evidence, to substantiate that the representation is true. Such testing shall be: (1)
randomized, double-blind, and placebo-controlled; and (2) conducted by researchers
qualified by training and experience to conduct such testing. In addition, all underlying
or supporting data and documents generally accepted by experts in the relevant field as
relevant to an assessment of such testing as described in the Section titled “Preservation
of Records Relating to Competent and Reliable Human Clinical Tests or Studies” must
be available for inspection and production to the Commission. Individual Defendant
shall have the burden of proving that a product satisfies the definition of Essentially
Equivalent Product.
D. Nothing in this Order shall prohibit Individual Defendant from:
1. Making any representation for any drug that is permitted in labeling
for such drug under any tentative or final monograph promulgated by the Food
and Drug Administration, or under any new drug application approved by the
Food and Drug Administration; and
2. Making any representation for any product that is specifically
permitted in labeling for such product by regulations promulgated by the Food and
Drug Administration pursuant to the Nutrition Labeling and Education Act of
11
1990 or permitted under Sections 303-304 of the Food and Drug Administration
Modernization Act of 1997.
IV. PRESERVATION OF RECORDS RELATING TO COMPETENT AND RELIABLE HUMAN CLINICAL TESTS OR STUDIES
IT IS FURTHER ORDERED that, with regard to any human clinical test or
study (“test”) upon which Individual Defendant relies to substantiate any claim covered
by this Order, Individual Defendant shall secure and preserve all underlying or
supporting data and documents generally accepted by experts in the field as relevant to an
assessment of the test, including, but not necessarily limited to:
A. All protocols and protocol amendments, reports, articles, write-ups, or other
accounts of the results of the test, and drafts of such documents reviewed by the test
sponsor or any other person not employed by the research entity;
B. All documents referring or relating to recruitment; randomization;
instructions, including oral instructions, to participants; and participant compliance;
C. Documents sufficient to identify all test participants, including any
participants who did not complete the test, and all communications with any participants
relating to the test; all raw data collected from participants enrolled in the test, including
any participants who did not complete the test; source documents for such data; any data
dictionaries; and any case report forms;
D. All documents referring or relating to any statistical analysis of any test
data, including, but not limited to, any pretest analysis, intent-to-treat analysis, or
between-group analysis performed on any test data; and
12
E. All documents referring or relating to the sponsorship of the test, including
all communications and contracts between any sponsor and the test’s researchers.
Provided, however, the preceding preservation requirement shall not apply to a reliably
reported test, unless the test was conducted, controlled, or sponsored, in whole or in part